The Greening of the Corporation

A new report analyzes how far advanced top companies are in addressing climate change and adopting environmentally friendly policies

By Heather Green

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Some of the world's biggest consumer and tech companies, ranging from Intel (INTC) to Nike (NKE), are making strides to reduce their businesses' impact on global warming. But plenty of others, including Apple (AAPL), Estée Lauder (EL), and even Whole Foods (WFMI), still have a long way to go. Ceres, an alliance of investors and environmentalists, outlines those findings in a new report that examines the climate-change policies of 63 of the world's largest consumer and IT businesses.

Ceres bills the report as the first comprehensive study of how the top global consumer brands are responding to climate change. Titled Corporate Governance and Climate Change: Consumer and Technology Companies, the report rates companies on several fronts: slashing greenhouse gas emissions; becoming more energy-efficient; and providing leadership at the highest levels for climate-change initiatives. The results rank companies in 11 industry sectors, including apparel, big-box retail, technology, and real estate. IBM (IBM), Tesco (TESO), and Dell (DELL) topped the list, while Burger King (BKC), Tim Hortons (THI), and Abercrombie & Fitch (ANF) were at the bottom. More than half of the companies scored less than 50 points out of a possible 100.

The study was carried out at the request of institutional investors in the Investor Network of Climate Risk (INCR), a group of 75 investors that are allied with Ceres and manage more than $7 trillion. Besides wanting to identify which companies are most environmentally friendly, the investors also wanted to understand the liabilities companies might face because of global warming. In the past, Ceres conducted similar rankings of utilities, heavy industries, and banks, which tend to be more directly affected by existing or potential carbon regulations. "Climate change poses real risks to corporations—risks that directly impact profitability and long-term viability," says Thomas P. DiNapoli, the New York State Comptroller and sole trustee of the state's $153.9 billion Common Retirement Fund, an INCR member. "Every step toward increased transparency and disclosure is a step in the right direction."

Ripple Effect

Now, investors are becoming more interested in the big consumer and tech companies. In part, that's because President-elect Barack Obama promised to cut global-warming emissions and is including green energy programs in his massive infrastructure stimulus plan. The U.S. could adopt a so-called cap and trade program for greenhouse gases, which would place limits on emissions. The policy would likely make fossil fuels more expensive, producing a ripple effect on balance sheets of these sprawling companies. Wal-Mart (WMT), for example, produces nearly 20 million tons a year of greenhouse gases, about the same as a utility.